The Free-Rider Problem, When Referring to Monitoring of the Firms

question 6

Multiple Choice

The free-rider problem, when referring to monitoring of the firms' performance, often results in

• A)ineffective monitoring by the shareholders.
• B)monitoring being delegated by shareholders to boards of directors.
• C)no monitoring by a large number of small individual investors.
• D)ineffective monitoring by the shareholders, monitoring being delegated by shareholders to boards of directors, and no monitoring by a large number of small individual investors.

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Definitions:

Material Charge

The cost associated with acquiring materials that are directly used in the production of goods or services.

Direct Cost

Costs that are directly attributable to the production of goods or services, such as labor and materials.

Variable Manufacturing Costs

Costs that vary directly with the level of production output, such as raw materials, labor, and energy consumption.

Cost-Plus Pricing

A pricing strategy where a fixed percentage is added to the total cost of producing a product to determine its selling price.